ch 19

They already come with answers, but you need to come up with your additional/complementary explanations on why the answer is correct.

1. An increase in the price of a commodity __________ the loss on a short position in a commodity futures contract.

2. A futures open interest __________ as the contract approaches expiration.

3. The gain on a long position in a futures contract __________ as the price of the commodity increases.

4. The small margin requirement for futures suggests that the percentage gain on a short position __________ more than percentage decrease in the price of the commodity.

5. A decrease in the price of a commodity __________ the transfer of funds from the long position to the short position.

6. Producers of a commodity such as oil use futures to __________ the risk of loss from a price __________.

7. If the users of a commodity such as timber anticipate that the price will __________ they enter a futures contract to __________ the risk of loss.

8. A short position in an S&P index futures contract profits if stock prices and the index __________.

9. An increase in a portfolios beta requires __________ in the number of stock futures contracts to hedge risk.

10. An increase in stock futures prior to the start of trading on the NYSE __________ stock prices.

11. Since an increase in interest rates __________ the price of a bond, the expectation of higher rates argues for taking a short position in interest rate futures.

12. An increase in the dollar cost of the pound __________ the value of U.S. stocks held by British investors.

13. An American investor with a portfolio of European stocks __________ risk by hedging the dollar cost of the euro.

14. If an American firm enters into a swap agreement with a British firm, both firms __________ the risk associated with exchange rates.

15. An increase in risk __________ the payments received by sellers of credit default swaps.

ANSWER!!!

1. increases 2. decreases 3. increases 4. increases 5. increases 6. decrease, decrease 7. increase, decrease 8. decrease 9. an increase 10. increases 11. decreases 12. decreases 13. decreases 14. decrease 15. increases